Audit: State improperly spent some $16 million in Medicaid payments for prescription drugs

An audit found that the Michigan Department of Community Health improperly spent millions of dollars on prescription drugs through Medicaid, a joint federal and state-funded health insurance program for low-income people.MLive File Photo

LANSING, MI — The Michigan Department of Community Health paid more than $16 million in Medicaid payments for prescription drugs that it shouldn’t have covered, according to a state audit.

A report released last week by Michigan’s Auditor General found that DCH should be able to recover millions of dollars in medication payments through Medicaid, a joint federal and state-funded health insurance program for low-income people.

The audit estimates that DCH could recover about $15.3 million in payments for prescription drugs for beneficiaries who should have been covered by Medicare, a federally funded health insurance program for people who are 65 or older or disabled. Of that, $5.4 million is from the state’s general fund, a cost that otherwise would have been covered by federal Medicare dollars.

“The problem with these systems is that they were designed to service different populations, and over time they’ve been combined to some extent when a person is eligible for both, but they don’t work terribly well together,” said Ryan Sullivan, policy advocate for Michigan Consumers for Healthcare.

Sullivan, who advocates for Medicaid and health care reforms, said the Affordable Care Act should help better coordinate the two programs, a change he called “long overdue.”

DCH also spent at least $800,000 on pharmaceuticals prescribed by health care providers that were either sanctioned or deceased.

The state is not supposed to cover prescriptions from medical providers who have been suspended, terminated or excluded from Medicaid coverage as a result of fraud, patient abuse or other issues. It also shouldn’t cover prescriptions written by providers that pass away before Medicaid remits payment.

There's sometimes a considerable delay before death information is reported to and validated by the state and matched against Medicaid enrolled provider data, said DCH spokeswoman Angela Minicuci.

Payments end up slipping through the cracks, largely the result of system flaws that don’t timely notify DCH’s contracted payment processor of changes in status or ensure that payments are appropriate, according to the audit.

“As with every audit, the Michigan Department of Community Health views this audit as an opportunity to reevaluate our policies, processes, and procedures and make sure that we are providing the best possible services,” Minicuci said. “We do agree overall with the reportable conditions that were found regarding pharmaceutical payments and we have already begun taking steps to correct the findings and our systems, as well as recover funds when appropriate and cost effective.”

DCH expects to begin recouping money spent on Medicare-eligible employees in February. The department also said it will look into recouping payments for drugs prescribed by sanctioned providers, which was an issue in a prior audit.